Also from Wired, the Supreme Court agrees to review a Ninth Circuit decision on privacy rights in the context of background checks on government workers.

The FCC announces that it will recommend the sale of 500 megahertz of spectrum to meet the needs of mobile broadband users, from the Washington Post.

Programmers in trouble over financial misdeeds: two programmers who developed code for Madoff are charged with fraud (The New York Times, The Register) and the Securities Exchange Commission files a complaint against a one-man Russian investment company for hacking into online portfolios to “pump and dump” stocks (Switched, Wired).

Spicy IP reports that Brazil seems set to invoke WTO intellectual property cross-retaliation provisions for the first time, against the US.

The European Parliament threatens to bring a legal challenge against the European Commission if it fails to disclose details of the Anti-Counterfeiting Trade Agreement (ACTA), writes Outlaw (see our post on the controversial treaty here).

Also from Outlaw: Net Neutrality in the UK: Ofcom to probe broadband providers’ management of web traffic.

Google’s recent announcement that it is no longer willing to censor content on its China-based search engine, google.cn, has once again highlighted the difficulties U.S.-based online service providers face in the Chinese market. The reason given by Google for the move was a “highly sophisticated and targeted attack on [its] corporate infrastructure originating from China,” which was apparently aimed at accessing the gmail accounts of Chinese human rights activists. Though this has little to do with international trade or the World Trade Organization (WTO), a number of commentators have attributed much of Google’s loss of patience with the Chinese government as stemming from the government’s pattern of using of internet filtering and blocking against foreign service providers. Foreign Policy suggests that the Chinese government is using its “Great Firewall” as an instrument of online protectionism, by systematically excluding foreign providers in favor of domestic services. Thus, Google‘s search engine is being edged out by Baidu, Facebook by Ren Ren Wang and Kai Xin Wang, Youtube by Tudou and Youku, and so on.

Professor Tim Wu of Columbia University first made the case in a 2006 paper that there may be good grounds under WTO law to challenge certain aspects of internet filtering. The argument has since gained currency. In 2007, the California First Amendment Coalition (CFAC) drafted a briefing (pdf), alleging that China “is actively preventing U.S. internet companies from doing business in China while at the same time promoting Chinese internet companies engaged in the same or similar activities,” and setting out the legal basis for a claim. In February 2009, The European Parliament also adopted a resolution regretting “the increasingly abusive recourse to censorship in respect of online services and products which operates as a disguised trade barrier.”

What form would a trade challenge take? There may be a case under the General Agreement on Tariffs and Trade (GATT) (pdf), which covers trade in goods, with respect to digital content products (primarily in relation to audiovisual content), but the arguments most relevant to search engines and social networking services are those that arise under the General Agreement on Trade in Services (GATS) (pdf). While the GATT has been around since 1947 and provides relatively strong protections for free trade in goods, the GATS, which was signed in 1994, is widely perceived as a weaker instrument – and also one which is comparatively untested. One of the crucial structural differences between the GATT and the GATS is that the GATT applies to all categories of goods except those a Member (i.e. a signatory state) specifically excludes, whereas the GATS works on the basis of “positive lists”: Members assume obligations by making specific sectoral commitments (which may be limited and subject to conditions). Thus, for example, a Member might accept GATS obligations in relation to the cross-border supply of data processing services, but make no similar commitments in relation to financial services.

The applicability of GATS to online services such as Google’s search engine or Facebook’s social networking site is not a straightforward matter, as China’s commitments were formulated on the basis of a classification of services which was drafted at a time when the internet was still in its infancy. As Wu shows in his paper, there is a good case to be made that those categories could be interpreted as covering a range of online services. He also notes that paradoxically, despite having some of the most comprehensive internet regulations in the world, China has undertaken very significant commitments in the relevant sectors.

On the assumption that relevant online services, such as search engines and social networking sites, are covered by China’s sectoral commitments, what kind of arguments could be mounted under the GATS?

Article III imposes on Members obligations of transparency, including a requirement to publish promptly all relevant measures of general application which may affect the operation of the GATS. The administration and technical details of the Chinese internet filtering system are notoriously opaque, and Article III could perhaps be invoked to compel the Chinese authorities to be more open about how the system works, and in particular how decisions to block particular sites are made.

Article VI requires Members to ensure that, in relation to services for which specific commitments have been made, all measures of general application are administered in a reasonable, objective and impartial manner. There may be reason to doubt that filtering policies are administered on the basis of objective and impartial criteria, and it seems that there is little “due process” in decisions to block particular websites, which Article VI may be interpreted to require.

Article XVI was invoked, with partial success, by Antigua against the United States in the U.S. – GamblingWTO case, which concerned US laws prohibiting the provision of online gambling services. Article XVI obliges a Member to provide market access to foreign providers in those sectors for which the Member has made sectoral commitments. One of the difficulties in invoking this provision is that the measures which it prohibits are quantitative in nature: Members cannot impose limitations on the number of service providers, on the total value of services, on the total number of operations, etc. In U.S. – Gambling, the WTO Panel, which was subsequently upheld by the WTO Appellate Body on this point, found that the U.S. ban on gambling services amounted to a “zero-quota,” and was effectively a quantitative measure in violation of Art. XVI. In the case of Chinese internet filtering, this argument may prove harder to advance, as filtering, though disruptive, would not appear to impose a total ban on any particular category of online services. Even where specific services are blocked, this affects particular service providers, and would not appear to amount to a quantative restriction.

Article XVII sets out the national treatment obligation under the GATS. National treatment requires that Members accord services and service suppliers of other Members treatment no less favorable than it affords to domestic like services and service suppliers. It is clear that domestic suppliers of online services in China are also subject to filtering and onerous content monitoring obligations. Yet, for the purposes of the GATS, what matters is the de facto effect of these measures. If foreign websites are affected differently, for example, by being slowed down by filtering at the link between the Chinese internet and the outside world (as suggested by the CFAC’s Peter Scheer here), or being blocked even though similar domestic services are not (as appears to be the case with Facebook), then an argument could be made that China has modified “the conditions of competition” in favor of domestic services suppliers, contrary to Art. XVII.

One of the thorniest issues in a challenge to the Chinese internet filtering would be the applicability of the General Exceptions provided in Article XIV. Unless the measure at issue constitutes a means of unjustifiable discrimination, the GATS cannot be invoked to prevent the adoption of measures which are “necessary to protect public morals or to maintain public order” (among other justifications). Supposing that an argument could be made on the basis of one or more of the articles mentioned above, the Chinese government would undoubtedly seek to rely on Article XIV. This would compel the WTO Panel or Appellate Body to pronounce on whether internet censorship can or cannot be justified on grounds of public morals or public order. By international standards, it would seem clear that some measure of censorship is justified: governments around the world filter certain types of content, such as child pornography or content which incites racial or religious violence. Yet, even where a Member shows justification under an Article XIV general exception, the claimant Member may nevertheless prevail by showing that, though the measure was justified, there exists a reasonably available alternative which is less trade-restrictive. There is no doubt that Chinese internet filtering is a good deal more restrictive than the international norm (though this may be changing). The competence of the WTO is firmly rooted in “trade,” and ruling on this issue would in all likelihood drag it into more controversial territory.

It seems that there is a reasonably good case to be made that the Great Firewall of China is effectively being used as a trade barrier, and susceptible to challenge under the WTO framework. Yet the political fall-out that bringing such a claim would generate should not be under-estimated. Trade tensions between the U.S. and China are already simmering, as evidenced by last year’s U.S. safeguard measures adopted on Chinese-made tires and the Chinese anti-dumping and anti-subsidy investigations into certain “Detroit Three” vehicles launched shortly after. Striking directly at the internet censorship system, which the Chinese government sees as vital to national political stability, would undoubtedly amount to a declaration of trade war. In fact striking at the political heart of another Member’s system would be a move unprecedented in the history of the GATT and the WTO. In the wake of the Google announcement, the English-language Chinese publication, the Global Times (often described as voicing the more stridently nationalistic end of the Chinese official line) has already denounced U.S. attempts at “imposing” a freer flow of information as a form of “information imperialism.” There is a deep historical distrust in China of “Unequal Treaties” imposed by Western powers, and it could be that a WTO claim would compromise China’s future commitment to the WTO system itself, as well as causing deep and lasting resentment. Hilary Clinton’s speech of last week on internet freedom suggests that the U.S. government is still committed to dialogue and a negotiated solution. Yet, merely knowing that WTO law provides grounds for a statable claim could prove a significant bargaining chip in negotiations, which might at least result in the toning down of some of the more discriminatory aspects of Chinese internet filtering policy.